​MBA, NAR weigh in on FHA's annual report to Congress

The Federal Housing Administration’s (FHA) Annual Report boasting a healthy Mutual Mortgage Insurance Fund (MMIF) was impetus for the National Association of Realtors (NAR) to call for FHA to reduce mortgage insurance premiums to better reflect the risk in the marketplace and to eliminate life-of-loan mortgage insurance. But the Mortgage Bankers Association (MBA) was a bit more cautious, citing the continued volatility of the HECM book of business as a reason to remain conservative.

"Today's positive report on the state of FHA will most likely renew calls for a reduction in FHA fees,” said MBA President & CEO David H. Stevens. “It is a worthwhile conversation, but must caution that today's report again shows the vulnerability to the reserve fund posed by the volatility in the HECM book. Given the HECM volatility and recent concerns about liquidity in the Ginnie Mae market, these discussions should occur with an eye toward long term stability for the FHA program.”

In its release regarding the FHA report, NAR said the steady financial trajectory of the MMIF is an opportunity to make FHA’s low-down-payment mortgage option available to an even broader swath of borrowers.

“FHA’s actuarial report shows that the fund has indisputably found its footing,” said NAR President William E. Brown, a Realtor from Alamo, California and founder of Investment Properties. “That’s good news for taxpayers, and a reflection of FHA’s sound stewardship. It’s clear from this report that FHA can continue taking responsible steps to manage their risk even as they take action to make homeownership more affordable for lower- and middle-income buyers.”

According to the FHA report, the independent actuarial analysis shows the MMI Fund's capital ratio grew by $3.8 billion and now stands at 2.32 percent — the second consecutive year since 2008 that FHA's reserve ratio exceeded the congressionally required 2 percent threshold.

In its commentary on the report, MBA said FHA leadership should be commended for the strides they have made since the downturn, but warned against too much optimism.

"An important subtext to this report is the continued volatility in the HECM book of business, which this year turned negative, dragging down the overall value of the MMIF,” the MBA said in its release. “Given the importance of FHA to low and moderate income and first time homebuyers, the next administration may want to look at accounting for the two programs individually in order to isolate the critically important forward book from the wild swings of the HECM fund.”

NAR agreed that the report would have appeared even stronger if not for weaknesses in the HECM program, but said in light of the MMIF’s increasingly good health, FHA should reduce mortgage insurance premiums to better reflect the risk in the marketplace and fulfill its mission of serving low- and moderate-income borrowers.

NAR said it also supports eliminating life-of-loan mortgage insurance, which borrowers must continue to pay until the loan is extinguished or refinanced. Conventional mortgage products, by contrast, traditionally require mortgage insurance only until a sufficient amount of equity is achieved on the property, according to NAR.

“FHA mortgages are an important option for buyers, but high premiums and lifetime insurance requirements can take that option right off the table,” Brown said. “By lowering premiums and eliminating life of loan mortgage insurance, FHA can expand on their work to serve a broad population of homebuyers. We look forward to working with them in the months ahead to bring these changes to light.”